Could a Google tablet compete with the iPad and Kindle Fire?

Google Inc. two years ago tried branding and selling a smartphone, the Nexus One. It closed shop after just a few months in what was widely seen as a dismal failure. Did it take away from this attempt some valuable lessons about marketing and selling mobile technology? It appears the answer may be yes.

Google later this year will sell through a new online store co-branded tablet computers in an attempt to steal market share from Apple Inc.’s dominant iPad and boost its Android mobile operating system’s presence in the fast-growing tablet market, according to a report today in the Wall Street Journal. Further, it plans to manufacture its own tablets once it closes the $12.5 billion deal to acquire Motorola Mobility Holdings, the report says.

Other media reports this week say Amazon.com Inc. is preparing to launch three more Kindle tablets this year, one with a screen nearly as big as the one on the iPad.

The big question is, could Google compete with the likes of tablet powerhouses Apple, No. 3 in the Internet Retailer Top 500 Guide, and Amazon.com, No. 1? Some analysts think Google would have a very tough row to hoe.

“While consumers remain curious about new tablets entering the marketplace, a tablet from Google might be a tough sell, depending on its price point and features,” says Pamela J. Goodfellow, consumer insights director at mobile device research firm BIGinsight. “The Apple iPad juggernaut is still rolling along thanks to the debut of its latest incarnation and can command a price point of $499 and higher. What set Amazon’s Kindle Fire apart from the rest was its relatively low cost, capable functionality and its established base of loyal Kindle users.”

While Google is undoubtedly a strong brand name, the failure of its Nexus One smartphone proves that Google can’t rely on brand power alone—a Google tablet would have to profoundly stand out in the crowd, and be priced at a point the market can bear, Goodfellow says.

Apple has sold tens of millions of iPad tablets and is by far the clear market leader; Amazon has sold perhaps six to 10 million Kindle Fire tablets, which is hot for a tablet that’s only a half of a year old, experts say. The companies have not released exact figures. Forrester predicts the following sales of tablets—consumers buying their first tablets and consumers replacing tablets—in the years ahead: 37.9 million in 2012, 46.6 million in 2013, 53.2 million in 2014, 57.1 million in 2015 and 60.3 million in 2016.

There are many tablets of all shapes, sizes and prices on the market. Apple and Amazon have been successful where most hardware manufacturers have not because the two giants have created digital ecosystems around their machines, many experts say. An iPad is the gateway to Apple’s App Store, iTunes, iBookstore and other realms of digital content. The same goes for Amazon, which comes out of the box automatically linked to the consumer’s Amazon.com account, through which they can buy e-books, music, movies, apps and more. Once a consumer buys an iPad or a Kindle Fire, they are immediately enmeshed in a mobile world.

This is where Google must excel in order for a Google tablet to be a serious contender—a Google tablet must be much more than simply a piece of hardware, says Avi Greengart, research director of consumer devices at Current Analysis Inc., a mobile hardware and telecommunications research and consulting firm.

“Google’s biggest challenge is to build an ecosystem of tablet-specific apps,” he says. “Pricing, design, and pretty much anything else is secondary.”

Earlier this month, Google consolidated its apps, e-books, and digital music and movies businesses into one destination it dubbed Google Play in a clear attempt to position itself against Apple and Amazon. This could be a sign that Google will indeed debut a tablet this year.

As for other factors, price likely will be important. That’s what Amazon.com set its sights on with the Kindle Fire when it decided to take on the iPad. The iPad starts at $499 while the Android-powered Kindle Fire is $199; however, the iPad comes with a bigger, high-definition screen—a key factor for many tablet consumers—and a more powerful processor. Might Google subsidize a tablet in order to better compete on price? Perhaps, but would that strategy work?

“Google might choose to break even on hardware costs, but outright subsidies are awfully hard to justify or sustain unless there are service revenues to offset them,” Greengart says.

Overall, Google does have a great amount of digital content it could string together for a tablet to compete with Apple and Amazon on the ecosystem front. And one thing it also has is a name.

But even with a strong value proposition, it would be extremely difficult for a Google tablet to come out on top because consumers have shown with their wallets that the iPad is the tablet of choice, says Brian Kilcourse, managing partner at Retail Systems Research LLC. "It's a race for second place," he says.